Assume Evco, Inc has a current stock price of $47.75 and will pay a $2.25 dividend...
Assume Evco, Inc has a current stock price of $47.75 and will pay a $2.25 dividend in one year; its equity cost capital is 15%. What price must you expect Evco stock to sell for immediately after the firm pays the dividend in one year to justify its current price?
Homework Answers
Growth rate = 15% - (2.25/ 47.75)
= 10.288%
Price after one year = $47.75 * ( 1+ 10.288%) = 52.6625
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